I think the issue was that that app was using private API's, users may not be fully aware of the implications of this, install via the Xcode method and then end up with issues when/if Apple messes with the API. So although it might look like Apple preventing holding down competition there are very valid reasons for the original response. (Not 100% sure that's what you were implying).
More than that, they were distributing an Xcode project that was little more than a binary, using the recent changes to developer code signing in Xcode to get that binary on to user devices. I can see how that alone would provoke a reaction from Apple, private APIs or not.
After all, there are plenty of open source projects on Github that merely use private APIs, the browser for tvOS[0] for example.
